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Road to 2025: A paradigm shift in retail capital markets

The last six months in retail capital markets have been intense. While the dust might settle soon, I think some things are here to stay for the next ten years:

Retail trading market share


Retail clients will be a force of positive change:

For a long time a speciality of the crypto world, traditional securities (stocks, ETFs, commodities) are now moved by large online communities, too. The trading share of retail markets in the US increased from 2019 to 2021 from 10% to 25% (Link). While some activities are meme-pumps, it shows the power of retail communities today. This new generation of investors is on the lookout for an ‘alpha’ and a ‘terra.’ That is, investments that positively impact our environment (Tesla) and society (Bitcoin). It is to be determined if regulators stop this movement by restricting PFOF for brokers (Link). Governments should not limit the right of retail clients to own their wealth. If they intervene, this could lead to an era of censorship-resistant decentralized exchanges (Link).

APR % of digital vs govermental cash

Digital cash > governmental cash:

Around 20% of Europe’s population will have a new neo bank account by 2023 from Link). Coinbase already serves 50m+ retail clients worldwide today. One of their killer features is to convert USD into USDC, their digital currency. The currency yields 5-10% APRs, an appealing proposition compared to negative and low yield interest rates in Europe and the US. USDC, as one of many digital cash alternatives, has grown 10x in the last 12 months from c. $500m to $5bn (Link). The more funds go into such digital cash alternatives, the less its risk (and returns, however). Further, USDC might be a bridge to fully decentralized cash alternatives such as Bitcoin and Celo. It will be hard to convince retail clients to go back from global, instant, high yield digital cash to today’s governmental cash alternatives.

Retail share at private capital markets %

Private capital markets will be accessible to the masses:

While neo brokers and banks often offer traditional securities, they extend their asset offering with new asset classes such as crypto. However, only 1% of retail clients have access to alternative private equity and real estate assets today. ‘Alts’ have a higher average return on investment and can provide brokers’ fat margins (Link). Liquidity is the missing piece. With fractionalizing alternative assets via blockchain technology, smaller increments are now available to retail investors. Neo brokers such as Exporo (real estate) and Moonfare (private equity) are at the forefront of that innovation. While these players start B2C, they might move to B2B, enabling other B2C players to tap into these attractive asset classes. Blockchain technology can reduce the costs for alternative asset issuance, custody, and distribution by up to 80%. A game-changer to make them widely accessible (Link).

Asset settlement times

New capital market infrastructure is on the horizon:

Apps will push the boundaries to provide wealth creation opportunities to retail clients. These apps will cause companies to build new capital market infrastructure (Link). The last weeks have shown that apps partly couldn’t execute trades at peak times. Their underlying infrastructure did not scale with them. Robinhood had to raise a >$3bn emergency capital injection to cover clearinghouse requirements and now intends to upgrade settlement times from T=2 to T=0 (Link). Trade Republic had to stop trades as their exchange partner had technical issues. Those infrastructure challenges provide an excellent opportunity to build something new. The future retail capital market infrastructure will be openly accessible via APIs to any native cloud app. It will be instant, 24/7, and at best prices via smart routers to different liquidity pools. It will be modular like lego blocks to adapt to market and regulatory changes quickly. It will reduce settlement times from T=2 to T=0 leveraging smart contracts. It will eliminate national borders providing a truly global experience to clients like today’s internet.


It is the best time in history to be a fintech founder. If you are building an app that enables retail clients to own their wealth, please reach out to us. We make it our mission to provide you with the infrastructure that gives you and your clients an edge. So many opportunities. So much stuff to do. Let’s go! 

Upvest CEO

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